China appoints new regulatory head for securities

Event

On January 26th the State Council, China's cabinet, named Yi Huiman as the chairman of the China Securities Regulatory Commission (CSRC).

Analysis

Mr Yi replaced Liu Shiyu, who had occupied the position since 2016. Mr Liu was reappointed as the deputy party secretary for the All-China Federation of Supply and Marketing Co‑operatives—a ministry-level position that is, nonetheless, widely considered to lack real policymaking power. While Mr Liu helped to successfully stabilise stockmarket turmoil in 2015 and oversaw the addition of China's A-shares to the MSCI index (a global stock index for leading funds) in mid-2018, his cautious regulatory approach resulted in limited reform and innovation in the financial sector as a whole.

Mr Yi, who was born in 1964, is among the younger generation of China's ministry-level officials. He spent most of his career at the Industrial and Commercial Bank of China, which he headed from 2013, cultivating a reputation for successful risk control according to Chinese media reports. His new role reflects central-government efforts to boost confidence in the financial market while simultaneously containing financial risks.

Mr Yi's first task will be launching the new tech board on the Shanghai exchange, which was announced by the president, Xi Jinping, in November 2018. The new board aims to introduce less rigid listing rules than the main board in a bid to attract more domestic technology companies. Under his leadership, CSRC will also process applications for foreign investors in the domestic equity markets as part of larger planned market openings.

The domestic stockmarket responded positively to Mr Yi's appointment. However, given pessimistic economic prospects in 2019, investor sentiment is likely to remain volatile, and the stockmarket is unlikely to become a reliable source for fundraising for firms. More reforms are likely under Mr Yi, however, including the simplification of listing procedures, while other CSRC regulators have also hinted recently at further approvals for foreign majority-owned securities joint ventures in the first half of 2019.

Impact on the forecast

We expect Mr Yi to take a modestly more liberal stance towards financial sector regulation than his predecessor, although barriers to market entry facing foreign financial firms will remain high. While we may amend our capital account forecast slightly to reflect these changes, no adjustments to our policy forecast are required.